So, Mama Group PLC has been up for sale. MAMA Group Plc is the parent company of number of UK-based music and media businesses. It has three divisions – Live Music, Artist Services, and Consumer – and owns, among other things, the Barfly venue chain, the Hammersmith Apollo, and The Fly magazine.
Technically there have been two bidders involved. But from a negotiating point of view there was only one realistic outcome – namely that Mama would be acquired by its co-venturing partner, HMV. This highlights something often forgotten in negotiations: that money is only important insofar as it addresses one of the parties’ needs.
The Mama group was originally the subject of a healthy bid from its largest shareholder, Luxembourg- based SMS Finance, which owns nearly a third of the live entertainment group. It has offered 4.75p a share to buy the rest of its shares.
Crucially, though, HMV is also a shareholder, originally owning just under 10% of Mama. HMV put £18 million into a joint venture with Mama in January 2009, as a result of which the two parties each own half of the Mean Fiddler venue in London. HMV also helps to operate other Mama venues including the Jazz cafe, Forum, Hammersmith Apollo and Garage.
The venture has been running well. It has added revenues from the Artist Services and Consumer divisions, contributing to overall Mama revenues for 2009 of £33.5 million and pre-tax profits of £4.8 million.
The existing relationship prompted HMV to bid £46 million for Mama. That’s 14% up on the alternative offer.
Analysing the negotiation, it’s clear that HMV needed Mama. The Physical retail sector for music has been in decline for the last 5 years in the UK. Although the UK suffered less than other territories in 2009 the long-term outlook is not healthy. DVD sales are in decline as well – a decline which Blu-ray will not reverse.
So, HMV has a need to open up other sectors and diversify into them. In negotiating terms, this might be characterised as a belonging need. Much as retailing music can no longer fulfil HMV’s ambitions on its own, live music is the new gang in town – and is perhaps closer to the historic heart of the business than selling movies and TV box-sets.
Live performance is one of the sectors where the music business has prospered in the face of the digital revolution. This represents a welcome addition to HMV’s interests and illustrates why HMV wants to become even more involved in the live music gang.
In negotiating over Mama, HMV has also had some bargaining power to wield. Firstly it has had “Information Power” about Mama – and information IS power in negotiation. It also has plenty of “Expert Power” because it understands the music sector. What is more, it has had some “Market Power” going for it: under go-ahead Chairman Simon Fox, HMV has been out-performing the market: like for like sales in 2009 were up 2.2% – the third straight year of increases.
But what of Mama’s other shareholders? Those with short-term interests will have had a need for an instant win, and HMV made the higher bid. Schroder Investment Management and Herald Investment Trust endorsed the HMV bid early on for example. Those with strategic interests will also have favoured HMV because they will have had a negotiating need for reassurance and security in any takeover – which was most likely to be met by a partner they already knew and trusted. Hence the Mama board endorsed HMV’s bid too. Take-up of the SMS offer was negligible. Last week HMV said it had secured acceptances of 56.4% of the shares.
The HMV takeover was inevitable – as Mama knows best.
Interview on deal-making for Smarta.com - the expert website for Business Owners
Clive Rich
Clive Rich, the creator of the Closemydeal app, is also a professional negotiator. He has made deals happen for the likes of Simon Cowell, Sony, MySpace and the Royal Opera House..
Why HMV was destined to take care of Mama ...
So, Mama Group PLC has been up for sale. MAMA Group Plc is the parent company of number of UK-based music and media businesses. It has three divisions – Live Music, Artist Services, and Consumer – and owns, among other things, the Barfly venue chain, the Hammersmith Apollo, and The Fly magazine.
Technically there have been two bidders involved. But from a negotiating point of view there was only one realistic outcome – namely that Mama would be acquired by its co-venturing partner, HMV. This highlights something often forgotten in negotiations: that money is only important insofar as it addresses one of the parties’ needs.
The Mama group was originally the subject of a healthy bid from its largest shareholder, Luxembourg- based SMS Finance, which owns nearly a third of the live entertainment group. It has offered 4.75p a share to buy the rest of its shares.
Crucially, though, HMV is also a shareholder, originally owning just under 10% of Mama. HMV put £18 million into a joint venture with Mama in January 2009, as a result of which the two parties each own half of the Mean Fiddler venue in London. HMV also helps to operate other Mama venues including the Jazz cafe, Forum, Hammersmith Apollo and Garage.
The venture has been running well. It has added revenues from the Artist Services and Consumer divisions, contributing to overall Mama revenues for 2009 of £33.5 million and pre-tax profits of £4.8 million.
The existing relationship prompted HMV to bid £46 million for Mama. That’s 14% up on the alternative offer.
Analysing the negotiation, it’s clear that HMV needed Mama. The Physical retail sector for music has been in decline for the last 5 years in the UK. Although the UK suffered less than other territories in 2009 the long-term outlook is not healthy. DVD sales are in decline as well – a decline which Blu-ray will not reverse.
So, HMV has a need to open up other sectors and diversify into them. In negotiating terms, this might be characterised as a belonging need. Much as retailing music can no longer fulfil HMV’s ambitions on its own, live music is the new gang in town – and is perhaps closer to the historic heart of the business than selling movies and TV box-sets.
Live performance is one of the sectors where the music business has prospered in the face of the digital revolution. This represents a welcome addition to HMV’s interests and illustrates why HMV wants to become even more involved in the live music gang.
In negotiating over Mama, HMV has also had some bargaining power to wield. Firstly it has had “Information Power” about Mama – and information IS power in negotiation. It also has plenty of “Expert Power” because it understands the music sector. What is more, it has had some “Market Power” going for it: under go-ahead Chairman Simon Fox, HMV has been out-performing the market: like for like sales in 2009 were up 2.2% – the third straight year of increases.
But what of Mama’s other shareholders? Those with short-term interests will have had a need for an instant win, and HMV made the higher bid. Schroder Investment Management and Herald Investment Trust endorsed the HMV bid early on for example. Those with strategic interests will also have favoured HMV because they will have had a negotiating need for reassurance and security in any takeover – which was most likely to be met by a partner they already knew and trusted. Hence the Mama board endorsed HMV’s bid too. Take-up of the SMS offer was negligible. Last week HMV said it had secured acceptances of 56.4% of the shares.
The HMV takeover was inevitable – as Mama knows best.